Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets.
The recent rainfall caused some level of optimism in the maize growing regions of South Africa. Soil moisture has generally improved across the maize-belt, which should support the crop in the coming months, particularly the late planted areas in the western sections of the Free State and North West provinces as maize is at stages of development that require high moisture.
This week (ending 30 March 2018) promises dry and cool weather conditions over most parts of the maize-belt, which should offer a breather as light rainfall is expected to return in the week of 11 April 2018. In addition, the next two months are expected to bring above normal rainfall, which bodes well for late planted areas.
Some global players are also fairly optimistic about South Africa’s 2017/2018 maize production. Most notably, the International Grains Council recently revised South Africa’s 2017/2018 maize production upwards by 900 000 tons from last month to 12.7 million tons.
While 28% lower than the 2016/2017 production season’s harvest, this is well above South Africa’s annual consumption of 10.5 million tons. This expected harvest, coupled with expected large carryover stock, underpin the view that South Africa could remain a next exporter of maize in the 2018/2019 marketing year which starts on 1 May 2018, with exports estimated at 2.2 million tons.
The International Grains Council recently revised its 2017/2018 global wheat production up by a million tons to 758 million tons, which is essentially a percentage point increase from the previous season. This is almost in line with the United States Department of Agriculture’s (USDA) production estimate for the same season.
This uptick is mainly underpinned by large production in the European Union, Russia, Argentina, Ukraine, China and India. The increase in production in these countries compensated for the decline in production in the United States (US), Canada, Australia and Kazakhstan.
The 2017/2018 global wheat ending stock is estimated at 256 million tons, up by 7% from the previous season. This implies that the global wheat prices could trade sideways in the short to medium term as the market remains well supplied.
As highlighted in our note on 19 March 2018, an uptick in global wheat production is a positive development for net importing countries such as South Africa, particularly from a wheat user or processor’s perspective. South Africa’s 2017/2018 wheat imports are estimated at 1.85 million tons. About two-thirds of this has already been imported. The leading suppliers thus far are Russia, Lithuania, Argentina, Germany and Ukraine.
At the beginning of last week (ending 23 March 2018), there were fears in the market that heavy rainfall could potentially cause damage in some soya bean growing areas. Fortunately, the initial assessments mainly suggest improvements in soil moisture, with no crop damages. We will, however, engage more farmers during the course of the week in order to get a full picture, particularly in Mpumalanga province.
Encouragingly, the weather could provide some breathing room this week, with forecasts for major soya bean growing provinces, Mpumalanga and eastern Free State, showing a possibility of drier and cool weather condition. There will potentially be light showers in the far eastern parts of both provinces.
Overall, these developments support the National Crop Estimates Committee’s view of a new record harvest of 1.4 million tons. An update of this estimate will be released tomorrow. We don’t foresee major changes in this estimate as weather conditions have been fairly favourable since the last assessment.
The expected improvement in production could also lead to a decline in South Africa’s soya bean oilcake imports. We estimate that the 2018 soya bean oilcake imports could decline by 17% from last year to 458 992 tons. This is a notable improvement from imports of close to a million tons in 2010, thanks to a continuous increase in domestic production.
In the fields, there is renewed optimism following last weeks’ rainfall over the sunflower seed growing areas. The late planted areas in the western section of the Free State and North West provinces stand to benefit most as the crop is at an early stage of development that requires moisture.
This week (ending 30 March 2018), however, could offer a breather, as weather forecasts show a possibility of dry and cool weather conditions across sunflower seed growing areas. The rainfall could return in the week of 11 April 2018. The weeks thereafter could also experience wet conditions as the South African Weather Service forecasts above normal rainfall between this month (March) and May 2018 in summer rainfall areas. These weather developments bode well for the 2017/2018 sunflower seed production.
SAGIS will release its monthly data for February 2018. Last month’s (February 2018) data showed that South Africa’s sunflower seed consumption (crushed oil and cake) was at 79 218 tons in January 2018, up by 28% from the corresponding period last year (2017).
The potato market lost ground in yesterday’s (26 March 2018) trade session owing to a fairly large stock of 830 365 pockets per 10kg bags at the start of the session. The price was down by 6% from the previous day, closing at R37.15 per pocket..
Towards the end of the session, the market experienced strong commercial buying interest, coupled with relatively lower deliveries on the back of slow harvest activity after the weekend (ending 25 March 2018). This subsequently led to a 29% decline in daily stocks to 587 136 pockets. This will potentially support the market today (27 march 2018).
Yesterday (26 March 2018), the fruit market settled on a mixed footing. The prices of apples and bananas were up by 2% and 11 percentage points from the previous day (25 March 2018), closing at R7.79 and R7.47 per kilogramme, respectively. These gains were mainly underpinned by lower stocks of 154 000 tons of apples and 173 000 tons of bananas.
The price of oranges was down by 4% from the previous day (25 March 2018), and settled at R4.75 per kilogramme. This was due to a slight uptick in stocks to 73 000 tons, well above the levels of about 50 000 tons seen in the past few days.
Find the full report here.